Economic inequality and the provision of schooling

This paper was presented at the conference "Unequal incomes, unequal outcomes? Economic inequality and measures of well-being" as part of session 3, "Education and crime in urban neighborhoods." The conference was held at the Federal Reserve Bank of New York on May 7, 1999. The authors examine the empirical evidence on the relationship between school finance reform and student outcomes, review the economic literature in the field, and present new evidence of the effects of reform on community and school composition. They argue that if one's goal is to reduce income inequality substantially, one should not look to school finance reform as a particularly effective policy instrument. Even the most optimistic estimates of the impact of school finance reform on the distribution of student performance indicate that these effects are relatively small. Furthermore, the authors note that these small gains may come at a cost - the movement of higher income families into private sector schools, a development that would lead to less diversity within the public schools.Income distribution ; Income ; Education

Automatic Fiscal Stabilizers in Sweden 1998-2009

In this note, I examine how the responsiveness of the Swedish public budget to business-cycle conditions has developed between 1998 and 2009. I document substantial changes in three components behind the budget elasticity: (i) the average level of personal income taxes has fallen substantially, (ii) the progressivity of personal income taxation has increased, and (iii) spending on unemployment compensation has fallen. The first two changes have opposing effects on the budget elasticity, and I find that the higher progressivity has had a marginally larger impact on the elasticity than the tax cuts. Also allowing for the lower unemployment compensations, the three effects add up to a small and non-substantial fall in the budget elasticity. Considering that most of the components behind the budget elasticity are imprecisely estimated, there is no clear evidence that the Swedish budget elasticity has changed during the last decade.Automatic stabilizers; budget elasticity; fiscal policy; stabilization policy

Options for a UK 'flat tax': some simple simulations

This Briefing Note analyses the effects of four possible flat tax systems for the UK: one that flattens the rate structure of income tax only, one that also flattens National Insurance contributions, and two that flatten the combined rate structure of income tax and tax credits (with and without flattening National Insurance contributions as well). In all cases, the tax base is left unchanged. The analysis is conducted for the working-age population only, and in all cases the reforms are designed to be revenue neutral under the strong assumption that people do not change their behaviour in response to the reforms. We examine the effects of the reforms on particular example families and on the overall distributions of income and work incentives

Tax and benefit changes: who wins and who loses?

* Tax and benefit changes implemented by Labour since 1997 will have a net cost to the exchequer of around £2.2 billion in 2005-06. The average (mean) impact of this small net giveaway is to raise household disposable incomes by £1.69 a week or 0.4%. The biggest proportionate gains are in the 2nd poorest tenth of the population, whose disposable incomes are increased by 11.4%, while the richest tenth fare worst, with a cut in income of 3.7%. * Tax and benefit reforms since 1997 have clearly been progressive, benefiting the less well-off relative to the better-off. Reforms in the second term - while less generous on average - were more progressive than those in the first, with the poorest faring better. * Increases in council tax above inflation since 1997 will raise £5.8 billion in 2005-06, net of council tax benefit. This outweighs the giveaway by central government, and leaves households overall £2.85 a week worse off on average, equivalent to 0.6% of their disposable incomes. The increase in council tax is regressive, except for the poorest fifth of the population, who are partially protected from the rises by council tax benefit

For Better and Worse: The Differing Income Tax Treatments of Marriage at Different Income Levels

Although both marriage penalties and marriage bonuses exist at all income levels under the federal income tax, the system is tilted toward penalties for lower-income couples, toward bonuses for middle-income couples, and back toward penalties for upper income couples. This Article begins by explaining how the tax rules produce these differing treatments of marriage at different points in the income distribution. It then argues that the increase in recent decades in the social acceptability and prevalence of cohabitation makes tax marriage effects a more serious concern--in terms of both behavioral, effects and fairness-than in earlier decades. After demonstrating that Congress has never offered any justification for the differing tax treatments of marriage at different income levels, and that no plausible defense exists for the current distribution of penalties and bonuses, the Article offers several policy recommendations. The most basic and most important recommendation is simply that, whatever Congress does in this area, it should make conscious decisions about the appropriate distributions of penalties and bonuses at various income levels, instead of following its current practice of stumbling into a set of poorly understood and almost-impossible-to-defend effects

Can Micro Health Insurance Reduce Poverty? Evidence from Bangladesh

This paper examines the impact of micro health insurance on poverty reduction in rural areas of Bangladesh. The research is based on household level primary data collected from the operating areas of the Grameen Bank during 2006. A number of outcome measures relating to poverty status are considered; these include household income, stability of household income via food sufficiency and ownership of non-land assets, and also the probability of being above or below the poverty line. The results show that micro health insurance has a positive association with all of these indicators, and this is statistically significant and quantitatively important for food sufficiency

The distributional effect of the 2008 Pre-Budget Report

The Pre-Budget Report given by the Chancellor on 24th November 2008 contained a number of changes to the tax and benefit system to come into effect at various points over the next three years. This briefing note expands on the information provided at a briefing given by IFS researchers on the day after the Pre-Budget Report1. It gives details of the changes to taxes, benefits and tax credits directly affecting households, and the total distributional impact of measures announced in PBR 2008 together with pre-announced changes, by income and expenditure decile and household type, at three points in time – January 2009, April 2009 and April 2011. It also discusses what PBR 2008 does to our impression of all tax and benefit changes under this Government. Finally, it discusses what PBR 08 did for child poverty in 2010/11 and the likely effects of the income tax changes for those earning more than £100,000 a year

Cooperation and Contagion in Web-Based, Networked Public Goods Experiments

A longstanding idea in the literature on human cooperation is that cooperation should be reinforced when conditional cooperators are more likely to interact. In the context of social networks, this idea implies that cooperation should fare better in highly clustered networks such as cliques than in networks with low clustering such as random networks. To test this hypothesis, we conducted a series of web-based experiments, in which 24 individuals played a local public goods game arranged on one of five network topologies that varied between disconnected cliques and a random regular graph. In contrast with previous theoretical work, we found that network topology had no significant effect on average contributions. This result implies either that individuals are not conditional cooperators, or else that cooperation does not benefit from positive reinforcement between connected neighbors. We then tested both of these possibilities in two subsequent series of experiments in which artificial seed players were introduced, making either full or zero contributions. First, we found that although players did generally behave like conditional cooperators, they were as likely to decrease their contributions in response to low contributing neighbors as they were to increase their contributions in response to high contributing neighbors. Second, we found that positive effects of cooperation were contagious only to direct neighbors in the network. In total we report on 113 human subjects experiments, highlighting the speed, flexibility, and cost-effectiveness of web-based experiments over those conducted in physical labs

THE ECONOMIC AND ENVIRONMENTAL IMPACTS OF INCREASING THE IRISH CARBON TAX. ESRI RESEARCH SERIES NUMBER 79 OCTOBER 2018

This study investigates the economic and environmental impacts of increasing the current carbon tax in Ireland from C20 per tonne of CO2 to C25, C30, C35 and C40. For this purpose, an Energy Social Accounting Matrix (ESAM) is developed for Ireland with 33 activities, 39 commodities, and ten household groups based on disposable income. The ESAM reproduces the structure of the Irish economy including production sectors, households and the government and quantifies the nature of all existing economic transactions among the diverse economic agents. Furthermore, the ESAM includes the flows of energy and emissions, creating a framework that can examine how money as well as energy and emissions flows between production sectors, households and the government. In this way the carbon content of different products and different households’ consumption is estimated. The current carbon tax in Ireland stands at C20 per tonne of carbon and is levied to incentivise households and producers to reduce their use of carbon-intensive goods. The carbon tax is relatively low, however, and constitutes just 1.9 per cent of total taxes levied on commodities in Ireland. Carbon tax accounts for only 7.6 per cent of total excise duties levied on petrol and 14 per cent of all excise duties on diesel. Our results reveal that increases in the carbon tax affect the prices of diesel and petrol the most. A C5 increase will increase the prices of carbon commodities by on average 0.8 per cent, and a doubling of the carbon tax to C40 per tonne of CO2 will increase the prices of carbon commodities by on average 3.4 per cent. The diesel price is expected to increase the most due to an increase in the carbon tax, whereby a C25 tax would result in a 1.7 per cent increase in diesel prices. A C40 tax would result in a 7 per cent increase in diesel prices. Putting this into context, it can be noted that in 2018 alone consumers have faced much greater fluctuations in diesel prices. Consumers are accustomed to relatively large fluctuations in fuel prices and may not react to increases in prices, assuming prices will fall again. This makes it extremely important to communicate a clear commitment to an increasing carbon tax by the government